Market Snapshot: Consumer electronics 17051

If the economy doesn’t look too good overall, nobody’s told the consumer electronics manufacturers yet. It’s obvious by their optimistic forecasts that they believe the trend will be for increased consumer spending on new gizmos and fantastic technology. The Consumer Electronics Assn. (CEA) projects U.S. sales to hit a new record this year, reaching $100 billion, a 3.5 percent increase over $96.2 billion in 2002.

Digital products are the primary driver behind the industry’s growth, according to a CEA report. DVD players continue as the fastest-growing technology of all time, now in 35 percent of U.S. households. U.S. sales totaled 17.6 million units in 2002, up 29 percent on the back of new combination DVD/VCR players. Sales are expected to climb an additional 14 percent in 2003, reaching 20.1 million units on sales of $2.6 billion.

Stand-alone DVD players saw factory-to-dealer unit sales surge during the first two months of this year, with an increase of 47 percent in January (797,024 units) over the same month in 2002. February factory-to-dealer unit sales were up 20 percent over the same period a year earlier, with 1.5 million units sold.

Digital TV (DTV) saw shipments of 2.693 million units in 2002. By the end of 2003, consumers will have invested more than $15 billion in DTV products with sales reaching 3.8 million units on sales of $5.5 billion, says the CEA report.

January 2003 factory-to-dealer sales of analog TV/DVD combinations totaled 40,435 units, up 193 percent over January 2002 figures. Factory-to-dealer sales for February soared 382 percent from February 2002 to 83,511 units.

Sales of flat panel or plasma TVs are expected to increase by 40 percent in 2003, with sales totaling $616 billion, up from $453 million in 2002. LCDTV sales in 2003 are projected to reach 1.1 million units on sales of $111 million, up from 965,000 units in 2002. Home theater-in-a-box is growing in the audio industry as consumers search for bigger and better sound that mimics that of theaters. Sales are expected to rise 10 percent during 2003 for total sales of 3.4 million units on sales of $1 billion.

Personal Digital
Consumers haven’t lost their lust for digital imaging and digital camera equipment, either. Sales of those products are projected to total more than 11 million units in 2003, up 26 percent from 2002, on sales of $2.9 billion.

The electronic gaming market is expected to total more than $12 billion in 2003, with sales of gaming software increasing by 17 percent to $9.2 billion.

According to the industry magazine TWICE (This Week In Consumer Electronics), personal digital assistants (PDAs) are poised for growth after a lackluster 2002. In March, Palm announced a layoff of 250 employees. However, the Milpitas, CA-based maker of PDAs expects 18.3 percent growth of these products from 2002 to 2007.

During Q4 2002 and Q1 2003, Palm unveiled three new PDAs: the Zire, which is targeted to the low-end market and priced at $99, and the Tungsten T and Tungsten W, which are geared toward corporate customers and come with higher price tags. Still, Palm announced in the first week of March that it cut its fiscal Q3 revenue target, citing lower-than-expected demand for its high-end products. The company expects sales of $205 million to $210 million, down from its past target of $230 million to $250 million.

Chinese Threat
All these terrific numbers should be good news for contract molders/manufacturers. However, unless you have facilities in Asia, you’re probably not jumping for joy.

One source, a molder that does contract manufacturing from several facilities in the U.S. and Mexico, and didn’t wish to be identified, attends the Consumer Electronics Show every year in January in Las Vegas. He says that in 2002 three Chinese television makers exhibited at the show. This year, there were nine. “The major TV manufacturers are having a tough time competing in the under-27-inch category,” says this molder.

Molders and moldmakers for whom consumer electronics was a primary market say that any significant business in that segment is all but gone in the U.S. Japanese giants like Sony and Toshiba, South Korea’s Lucky Gold Star, or the European biggie Philips Consumer Electronics NV of the Netherlands still do some manufacturing in Mexico, primarily large TV products.

However, as IMM reported last year (August 2002 IMM, pp. 26-28), the TV market is fast disappearing in Mexico as the consumer electronics giants head for Asia.

What this means is that business for U.S. molders in this arena is about as plentiful as the $2 bill. Precision Mold & Tool Inc. (San Antonio, TX), which a decade ago opened plants in LaFeria, TX and Reynosa, Mexico in response to the burgeoning consumer electronics business on the border, says the boom is over. “We’ve had to change how we’re doing business and who we’re doing it for,” says Domingo Auces, marketing and sales manager for Precision. “[The consumer electronics] business has shrunk, as most of these products have basically gone to China.”

Auces notes that Precision’s Reynosa facility still does some tooling work for Lucky Gold Star, but that business is “way down” from what that company did many years ago as a Zenith plant. “More and more of that work is being taken over by [Lucky Gold Star’s] Asian counterparts,” he says.